Excerpt: - .....for the company submitted that the claim of the petitioning creditor being based on a decretal claim, theapplication for winding up is not maintainable in view of the provisions of section 434 of the companies act, 1956, as the petitioner should have proceeded by way of execution of the decree and then and then only he could have come under section 434(1)(b) of the companies act, 1956. in short, his submission is that without executing the decree he has no right to file the winding-up petition. according to his interpretation of section 434 of the companies. act, 1956, whenever there is a decree, it must come under section 434(1)(b) of the companies act, 1956, and in the absence, it cannot be said that the company is unable to pay its, debts within the meaning pf the said section. he.....

Judgment:

Saul K. Roy Chowdhury, J.

1. This is an application for stay of winding up of the company. The facts shortly are that the company was incorporated on December 29, 1953, as a private company and is existing within the meaning of the Companies Act, 1956. The registered office of the company is situate at 12, Gray Street, Calcutta. It appears that the petitioning-creditor obtained an ex parte decree on January 5, 1973, in this court for a sum of Rs. 13,781.25 together with interest and interest on judgment at the rate of 6% per annum and costs as that of a defended suit until it was defended and thereafter as an undefended suit. The petitioning-creditor by a notice dated May 26, 1973, under Section 434 of the Companies Act, 1956, through his solicitor demanded the payment of the said decretal amount together with interest and costs thereon as provided in the said decree. The company having failed to pay the said sum of the petitioning-creditor on December 5, 1973, the winding-up petition was presented which was made returnable on December 11, 1973. On the returnable date it was adjourned till December 17, 1973, directing the petitioning-creditor to serve the notice on the company. Then again, on December 17, 1973, the matter was adjourned till January 7, 1974. On January 7, 1974, the matter was directed to appear for settlement on January 16, 1974. As the matter could not he settled, the petition was admitted and direction for advertisement was given on January 16, 1974. Thereafter, on February 11, 1974, the present application was made for stay of the winding up and I passed an ad interim order of stay on the company for depositing a sum of Rs. 3,000 with the petitioning-creditor's solicitor and on such deposit being made, ad interim stay in terms of prayer (c) was granted and direction for filing affidavits was also given and the matter has come up for hearing before me.

2. Mr. Bimalesh Chatterjee appearing for the company submitted that the claim of the petitioning creditor being based on a decretal claim, theapplication for winding up is not maintainable in view of the provisions of Section 434 of the Companies Act, 1956, as the petitioner should have proceeded by way of execution of the decree and then and then only he could have come under Section 434(1)(b) of the Companies Act, 1956. In short, his submission is that without executing the decree he has no right to file the winding-up petition. According to his interpretation of Section 434 of the Companies. Act, 1956, whenever there is a decree, it must come under Section 434(1)(b) of the Companies Act, 1956, and in the absence, it cannot be said that the company is unable to pay its, debts within the meaning pf the said Section. He has referred to the High Court Rules and also the Civil Procedure Code and the Rules, and : AIR1963Cal104 (sic) regarding the execution of the decree and the Rules relating thereto. Further, he submitted that the company was in difficulties and now it is improving and has a bright future as the customers of the company are like I.C.I. (India) Private Ltd., Metal Box Company of India Private Ltd., Railways, Defence Department of the Government and various other concerns. The turnover of the company is also quite substantial and there is a prospect of the company earning huge profits in future to pay off all its liabilities including that of the decretal claim of the petitioning-creditor. As an alternative, he submitted that if the court does not accept his submission, as to the maintainability of this winding-up petition being premature and misconceived on the above submissions, then the company should be given some time to pay off the claim of the petitioning-creditor so that the company may survive. The company is also expecting financial assistance from various financial institutions and they will be in a position to pay off the claim of the petitioning-creditor within a reasonable time. Therefore, the winding-up petition should be stayed to enable the company to pay off its liabilities as he submitted that if once the winding-up petition is advertised, it will cause great injury and loss to the company and will affect its working which is now showing progress and bright future.

3. Mr. Hirak Mitra, appearing with Miss Sakuntala Rao for the petitioning-creditor, submitted that the company has no bona fide defence to the claim of the petitioning-creditor. Right from the beginning the claim of the petitioning-creditor cannot be disputed and it has not been disputed in any way by the company. He further submitted that it is not necessary when the creditor has a decree to execute the same before he can make an application for winding up of the company. He submitted that Section 434(1)(a) makes it clear that any claim of the creditor, if it remains unpaid for a period of three weeks after serving the notice, the company should be deemed to be unable to pay its debts. He further submitted that there is no dispute as to the company having been served with notice under Section 434 and in spite of such notice they have failed to pay the decretal amount together with costs and interest as demanded in the said notice. He further submitted that the company has taken time to pay off the debt and in fact the matter was put in the list for settlement. Ultimately, the company has not paid the amount. Subsequently, it made this application for stay only to delay the proceedings as long as possible. He further submitted that the claim of the petitioning-creditor, which ultimately resulted in the decree dated January 5, 1973, originated in 1968, on account of price of goods sold and delivered. The petitioning-creditor is waiting for such a long time and has not been paid. He further submitted that when the company was in difficulty and if it has got such prospect as it has been stated in the affidavit in support of the stay application, there should not be any difficulty for the company to pay off the said sum due to the petitioning-creditor under the said decree together with interest and costs.

4. Considering the respective matters very carefully I cannot accept Mr. Chatterjee's contention that if there is a decree in favour of a creditor, he must execute the said decree before he can present a winding-up petition on the ground that the company is unable to pay its debts. Section 434 is quite clear in providing the circumstances under which the company should be deemed to be unable to pay its debt. Sub-section (1)(a) makes it clear that if a notice is served on the company regarding payment of any debt due to the creditor and as such, the debt is not satisfied within three weeks from the date of service of the notice, then the company should be deemed to be unable to pay its debt. Clause (b) is disjunctive and alternative ground for the deeming provisions under Section 434 of the Companies Act, 1956. A creditor has got an option either to execute the decree upon serving a notice under Section 434(1)(a) in respect of the decretal claim or to wait for three weeks after the date of the service of the notice. If the company fails to satisfy the claim, then he can present a winding-up petition. It is now well settled that the winding-up petition is an equitable mode of execution in respect of the claim of a creditor of a company : See Harinagar Sugar Mills Co. Ltd. v. M.W. Pradhan [1966] 36 Comp Cas 426 (SC). Therefore, I do not find any substance in the contention of Mr. Chatterjee that this application is not maintainable. Now, the only question is whether I should grant a stay in the facts and circumstances of this case. It appears that the company pursuant to an order of ad interim stay granted by me on the 11th of February, 1974, has deposited a sum of Rs. 3,000 with Mr. G.P. Lath, solicitor for the petitioning-creditor. However, from the affidavits and application of the company and also taking judicial notice of the fact of the improving industrial climate in West Bengal, particularly in the paper industry, it may be legitimate to expect that the company would be in a position to pay off the claim of the petitioning-creditor within a reasonable time which in the facts and circumstances of the case appears to be up to the 30th of June, 1974. The company has also employed about 20 workmen and it is a small concern having quite a reasonable and fair prospect of surviving and paying off the petitioning-creditor's claim which is the subject-matter of the winding-up petition. I quite appreciate the apprehension of Mr. Mitter that by getting the stay the company might fritter away its assets which are already charged in favour of the banks and other financial institutions and there may not be anything left for creditors to realise their dues out of the assets of the company. At the same time, I have also to consider that this is a stage before the winding-up petition is advertised, and the company has come with a bona fide application depositing Rs. 3,000 with the petitioning-creditor's solicitor pursuant to an order of this court. Mr. Chatterjee also proposes to pay by instalments the balance sum which appears to be roughly about Rs. 13,000. After taking into account the sum of Rs. 3,000 which has already been deposited with Mr. G.P. Lath, solicitor of the petitioning-creditor, and instalment of about Rs. 2,000 per month, in any event the entire balance sum of about Rs. 13,000 would be paid off by the 30th June, 1974. Therefore, it appears to me that in the facts and circumstances of the case the proper order should be that the winding-up petition be stayed up to the 30th of June, 1974, The petitioning-creditor's solicitor, Mr. G.P. Lath, is directed to pay the said sum of Rs. 3,000 lying deposited with him to the petitioning-creditor who will appropriate the same towards the decretal claim and when the matter was discussed in court, it appears that 60 G. Ms. may be the reasonable amount for the costs of both the suit and winding-up application and the present application which is to be paid by the company to the petitioning-creditor and the decretal amount together with interest at the rate of 6 per cent. per annum up to date comes to about Rs. 14,800. Therefore, after appropriating the said sum of Rs. 3,000 towards the claim of the petitioning-creditor, a sum of about Rs. 12,800 remains due and payable by the company to the petitioning-creditor. The company would be at liberty to pay the said amount by instalments of not less than Rs. 3,000 per month, the first of such instalment would be payable on the 15th of March, 1974, and thereafter on the last date of each subsequent month. If the company pays the said amount in the instalments specified hereinbefore, then the winding-up petition will remain permanently stayed. In default of payment of any monthly instalment the stay would stand vacated and the petition would be advertised once in the Statesman, once in the Ananda Bazar Patrika and once in the Calcutta Gazette thereafter, and the winding-up petition would appear in the list three weeks after such advertisement to be issued. In case the company fails to satisfy the claim and costs of the petitioning-creditor ashereinbefore stated within the time aforesaid, this application will stand dismissed with costs and the stay will be vacated and the petitioning-creditor will be entitled to add the costs of this application to his claim. Mr. G.P. Lath; solicitor of the petitioning-creditor, to act on a signed copy of the minutes and to pay the sum of Rs. 3,000 lying with him to the petitioning-creditor. There will be an injunction against the company not to deal or dispose of the assets of the company.